Norwegian blames long-haul costs for fall in profit

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Norwegian made a pre-tax profit of Nkr437 million ($71.5 million) in 2013, down from the NKr623 million it generated in 2012.

The Oslo-based carrier attributes a fourth-quarter loss of NKr283 million to “unexpected costs” relating to the launch of its long-haul operations.

Turnover for the year was Nkr15.6 billion, an increase of 21%. Capacity was increased 32%.

Additional costs associated with launching the airline’s long-haul business amounted to Nkr216 million for the full year, including Nkr101 million in the third quarter and Nkr45 million in the fourth quarter, Norwegian says.

The low-cost carrier cites costs related to wet-leasing and fuel as well as accommodation, food and beverages for passengers delayed by technical and operational problems.

Norwegian was forced to lease two Airbus A340-300s from Portuguese operator HiFly in May 2013 after a delay in the arrival of its first Boeing 787s.

Another A340 was wet-leased in September after Norwegian was forced to take one of its two 787s out of service temporarily after operational difficulties.

Norwegian carried 20.7 million passengers in 2013, three million more than the previous year. It describes its load factor as “strong and high”.

Fourth-quarter turnover increased 22% to NKr3.8 billion.

The airline carried 5.25 million passengers during the fourth quarter, up 20%. Capacity was boosted 41%. Load factor increased by one percentage point.

“We have had significant and unexpected costs due to the start-up of the long-haul operation, with delayed deliveries of aircraft and many technical issues. Furthermore, the profit has also been affected by a weaker Norwegian krone. However, it is clear that our business model works and is in line with our strategy,” says chief executive Bjorn Kjos.

“Cash flow from operations has been very strong. We have cut costs and added new capacity, while at the same time maintaining the load factor. Strong competition on certain routes affects the price level, but Norwegian is still better equipped than ever to meet the competition.”